Director of Labour Market Enforcement publishes his strategy

11 May 2018

Background

Sir David Metcalfe, the UK’s first Director of Labour Market Enforcement has published his long awaited strategy for 2018/19. The paper sets out 37 recommendations targeted at tackling non-compliance in the labour market from ignorant or negligent practices to the criminal exploitation of workers.

With a remit over National Minimum Wage (NMW), Gangmasters & Labour Abuse (GLA) and the Employment Agency Standards Inspectorate (EAS), Sir David’s recommendations come in response to a public consultation launched in the summer/autumn of 2017 and looks specifically to ensure that labour market laws and regulations are being fully enforced.

Scope

Whist the paper addresses a number of areas including the protection of workers in specific industries real focus is also given to matters relating to the enforcement of National Minimum Wage (‘NMW’) and payment of holiday pay.  

National Minimum Wage

While Sir David says that he has some sympathy with employers who have been found to have accidental breaches of the NMW Regulations he does not believe that there is currently sufficient deterrent for employers to discourage breaches of NM.  He therefore:

  • Specifically recommends an increase in the NMW penalty multiplier (which currently sits at 200% of the underpayment) and suggested that this increase in revenue could be recycled into the enforcement system as additional resource.  This may even be based on the level of the employer’s turnover;
  • Proposes that where employers are not-compliant, they should be charged a fee for enforcement intervention to recover the costs associated with the investigation; and
  • States that he would like to see greater use of prosecution under the Regulations and a “significant increase in the size of civil penalties”

The strategy paper also suggests a number of changes in approach by HMRC and BEIS as enforcers of NMW, including:

  • Enforcement bodies to improve education and support for employers to reduce accidental breaches;
  • BEIS and HMRC in collaboration with stakeholders to review existing written guidance to provide greater clarity on complex technical areas such as pay averaging and salary sacrifice; and
  • A shift away from naming and shaming for accidental breaches with a heavier focus on serious violations.

Holiday Pay

Holiday pay is highlighted as an area of increased focus going forward with Sir David saying that there is evidence to suggest that underpaid paid Holiday Pay is as big an issue as NWM and warrants a focused approach to non-compliance. On that basis Sir David specifically recommends that:

  • HMRC, or another appropriate state body, should be provided with the powers and remit to take responsibility for the enforcement of holiday pay for all workers, including mechanisms to recover holiday pay arrears; and
  • That in the interim EAS and GLAA teams should make use of their existing enforcement frameworks to investigate holiday pay as a matter of priority.

Aside of this strategy paper, we await to see the outcome of the Government’s recent consultations following the Taylor review which also refer to holiday pay and how it could potentially be legislated for in due course.  

Other matters addressed

In addition to making recommendations and proposals in respect of NMW/NLW and holiday pay Sir David also stated that:

  • All workers should have the right to a payslip and that it should be mandatory for employers to include both the number of hours worked as well as the associated hourly rates of pay.  This has recently been enacted and comes into force from April 2019;
  • All workers should be entitled to a written statement of rights within the first week of employment and advised the Government to draft and provide a template for business to use;
  • That HMRC should “pursue with vigour” the recent change in policy guidance which encourages HMRC to prosecute, as a standalone offence, the absence of, or failure to keep adequate, records;
  • To ensure compliance through supply chains measures should be introduced to hold parties jointly liable for any non-compliance found within the supply chain (with a potential for naming and shaming where an opportunity to correct infringements is not adhered to); and
  • That provision should also be made to enable the temporary embargo of ‘hot-goods’ to disrupt supply chain activity where non-compliance is found.

Sir David Metcalfe’s intended approach

In looking to achieve these Sir David comments at length about developing the Office Information Hub with the use of intelligence and joint working between the three enforcement bodies (HMRC, GLAA and EAS) and the Strategic Coordination Group, including

  • Promoting awareness of rights to workers by:
    • The use of targeted social media campaigns;
    • Making it mandatory for employers to display workplace notices detailing rights and how to enforce them; and
    • The education system informing young people of their rights as they prepare to enter employment.

Finally Sir David proposes to raise another consultation in summer/autumn 2019 to inform his next strategy.

Conclusion

Sir David Metcalfe’s paper when read together with the Government’s Good Work Plan suggests that that significant changes are on the horizon for employers and businesses.  Ensuring pay and worker rights compliance is now critical. Employers need to be reviewing working and pay practices to avoid the increasing financial penalties and public naming and shaming which is likely to be the norm in the near future.

We will be holding a series of seminars in the autumn to discuss common areas of failure specifically with regards to NMW and holiday pay and what employers should be doing in light of these developments and those under the Government’s Good Work Plan.

For more information please contact John Harding email john.l.harding@pwc.com or telephone 07801 042 607.

 

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